Politics through the Lens of Economics

Lecture 13

Collapse of Inclusive Institutions:

Medieval Venice and Ancient Rome

January 15, 2019

Masayuki Kudamatsu

Chapter 6 of Why Nations Fail

Week 13

Chapter 6

Week 11

Chapter 14

United Kingdom

in 19c

 

United States

in early 20c

Republic of Venice

 

 

Roman Republic

Weeks 11-13: Survival of Inclusive Institutions

Botswana

 

 

US South

in the 1950s-1960s

 

Brazil

since the 1970s

Week 12

Chapter 11

Last week's theme:

What makes inclusive institutions survive?

Inclusive

institutions

Rule of laws

Economic growth

with

income equality

Free Media

Today's theme:

How can inclusive institutions collapse?

Medieval Venice

Ancient Rome

Prosperity until 13th century

La Serrata and economic decline since 14th century

Economic growth during the Republic period

Civil wars and economic decline during the Imperial period

 Medieval Venice

Image source: The Telegraph

This section of the lecture heavily relies on Puga and Trefler (2014) 

in addition to pp. 152-158 of Why Nations Fail

Medieval Venice's shipping lanes

Source: Figure I of Puga and Trefler (2014)

Imported by Venice from the East:

spices (cf. Lecture 8), Byzantine-manufactured goods, slaves

Medieval Venice's prosperity

Population

1050

1200

1330

110,000

70,000

45,000

As big as Paris

3 times as big as London

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Is this a result of inclusive economic institutions?

?

Economic institutions of medieval Venice

Source: Figure III of Puga and Trefler (2014)

Commenda contract signed by Zaccaria Stagnario and Giovanni Agadi in August 1199

Commenda (a kind of joint stock company)

Sedentary partner

(stays in Venice)

Traveling partner

(sails to the East)

Joint

venture

capital

travel with merchandise

Profits

75%

25%

Loss

100%

Economic institutions of medieval Venice (cont.)

How a commenda contract works

Poor merchants could make a fortune out of commenda

economic institutions
Secure
for everyone
Property rights Insecure
for majority of people
Free Occupational
choice
Forced labor
Free Entry of new businesses Prevented by monopolies
Unbiased System of laws Biased for
the powerful/rich
Promoted Public service provision Discouraged

Economic Institutions

Inclusive

Extractive

Property rights

Secure for everyone

Insecure for

majority of people

Occupational choice

Free

Forced labor

Entry of

new businesses

Free

Prevented by

monopolies

System of laws

Unbiased

Biased for

the powerful / rich

Public service provision

Provided

Limited

That is...

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Is this a result of inclusive political institutions?

?

Doge of Venice (head of state)

Until 1032

Selected for life by powerful families

Palazzo Ducale (Doge's Palace)

Doges come from mainly three families during this period

The Participazio

The Candiano

The Orseolo

Source: Figure II of Puga and Trefler (2014)

Political institutions of medieval Venice #1

Doge of Venice (cont.)

From 1032 to 1172

Constitutional constraints imposed on Doge 

Dynastic succession reduced

Source: Figure II of Puga and Trefler (2014)

1. Not allowed to appoint his successor

2. Required to

consult with two-member Ducal Council

abide by Council's decisions

e.g.

Domenico Flabanico's portrait

Domenico Flabanico (in office 1032-1043)

Silk merchant

from a family not having high office previously 

Source: Venipedia.it

Inclusive

Extractive

Both

Plurality

and

Centralized

State

Either

Absolutist

or

Lack of

Centralization

That is...

Doge of Venice (cont.)

From 1172 to 1297

Constitutional constraints on Doge: strengthened further by

1. Great Council (limited-franchise elected parliament)

2. Ducal Council: expanded to 6-members (elected by Great Council)

3. Oath of office, sworn publicly by Doge to hold, lists what he cannot do

Expropriate state property

Preside over cases against himself

Elect his successor

e.g.

Doge could not do anything without approval of Council

Great Council

from 1172 to 1297

(1) office holders of the Venetian state (e.g. judges)

(2) 100 members nominated each year

      by 4 existing members chosen by lot

Made up of

Chamber of Great Council

in Doge's Palace, Venice

Political institutions of medieval Venice #2

Great Council (cont.)

Comparison of members between 1261-66 and 1293-96

50 new families

entered the Council in 1293-96

47 out of 162 families:

lost seats in the Council

Many of the other 115 families

lower seat shares in 1293-96

Political power wasn't concentrated in a few families

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

So Medieval Venice's prosperity is a result of:

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Was Medieval Venice's prosperity sustainable?

?

There is always an incentive for the elite

to restrict the inclusiveness of institutions (cf. Lecture 12)

e.g.

Whigs in early 18c Britain

Robber Barons in late 19c US

Collapse of inclusive political institutions

1286

Automatic if father & grandfather were members

Great Council membership became hereditary over time

Otherwise required to be approved by Council of Forty

(i.e. families in Council for two generations or more)

1297

Automatic if being a member for previous 4 years

1298

Current members require no confirmation

Known as La Serrata (the Closure of Venice)

Inclusive

Extractive

Both

Plurality

and

Centralized

State

Either

Absolutist

or

Lack of

Centralization

That is...

Collapse of inclusive economic institutions

Galley ships

source: Section V.C of Puga and Trefler (2014)

Shipment of wares worth more than a merchant's wealth

Banned in 1324 (by a law called Capitulare Navigantium)

Nationalized and auctioned off to nobles only since 1321

Fast to escape from pirates

But small cargos

Best for valuable lightweight goods (silk, spice etc.)

Image source: Wikimedia Commons

source: Table I of Puga and Trefler (2014)

1073-1200

1201-1220

1221-1240

1241-1261

1310-1323

1324-1330

1331-1342

65

63

79

59

81

21

12

27

24

42

30

# of

surviving

commenda

# of commenda involving

those without Council seats

in 1261-1323

42%

38%

53%

51%

Collapse of inclusive economic institutions (cont.)

22

1

0

27%

5%

0%

La Serrata

economic institutions
Secure
for everyone
Property rights Insecure
for majority of people
Free Occupational
choice
Forced labor
Free Entry of new businesses Prevented by monopolies
Unbiased System of laws Biased for
the powerful/rich
Promoted Public service provision Discouraged

Economic Institutions

Inclusive

Extractive

Property rights

Secure for everyone

Insecure for

majority of people

Occupational choice

Free

Forced labor

Entry of

new businesses

Free

Prevented by

monopolies

System of laws

Unbiased

Biased for

the powerful / rich

Public service provision

Provided

Limited

That is...

Medieval Venice's prosperity

Population

1050

1200

1330

1500

110,000

100,000

70,000

45,000

& decline

Today Venice is a museum

Image source: The Telegraph

Ancient Rome

Image source: musement.com

Archaeological evidence #1

Roman Republic's economic growth

# of shipwrecks found in the Mediterranean

Before 500 BC

Image source: ansamed.info

Around AD 1

20

180

Archaeological evidence #2

Roman Republic's economic growth

Image source: NASA Earth Observatory

Amount of lead, silver, copper trapped in Greenland Ice Core

Indicates how much minerals were mined

Silver for coins

Lead for pipes & tablewares

e.g.

Roman Republic's economic growth (cont.)

Rose after 350 BC

 

Peaked in AD 1c(?)

Source: Figure 3 of McConnel et al. (2018)

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Is this a result of inclusive institutions?

?

?

None is mentioned in Why Nations Fail...

Roman Republic's inclusive economic institutions

Slaves account for 1/3 of population, though.

Image source: Wikimedia Commons

Two slaves are pouring wine from the jars

 

Roman mosaic from Dougga, Tunisia (2nd century AD)

Roman Republic's inclusive political institutions

Since 510 BC (when Roman King was overthrown)

Governed by multiple magistrates elected for a year

In 5th century BC

Plebeians (free citizens) refused to cooperate with magistrates

by withdrawing to a hill outside the city ("secession")

Plebeians gained the right to

(i)  elect tribunes (who could veto the decision by magistrates)

(ii) enact laws in Plebeian Assembly

The Secession of the People to the Mons Sacer

engraved by B.Barloccini, 1849

cf. U.S. (Lecture 6) and Australia (Lecture 7)

Inclusive Economic Institutions

Economic Growth

Inclusive Political Institutions

Does the theory explain Roman Republic?

Was this sustainable?

?

Roman military conquest and its aftermath

Citizen-soldiers

Small landowners in Italian peninsula

Two Roman foot-soldiers

Fought in the army when necessary

and returned to their plots

Roman military conquest and its aftermath (cont.)

As Roman Republic expanded its territory...

Citizen-soldiers were away from their plots for years

Their plots were abandoned

& absorbed by the estates of senators (large landowners)

Decommissioned citizen-soldiers gathered in Rome

Inequality in landholding kept rising

Roman military conquest and its aftermath (cont.)

Tiberius Gracchus

elected as plebeian tribune in 133 BC

Proposed to redistribute

land in excess of legal limit of 300 acres

to landless citizens

("Lex Sempronia Agraria")

Senators strongly objected and killed Tiberius

Tiberius himself attempted to ignore the constitutional constraints on himself, though (see Wikipedia)

Collapse of inclusive political institutions

Throughout 1st century BC

Conflict continues between senators and plebeians

82-80 BC

49-44 BC

Julius Caesar

weakened the power of senators

Collapse of inclusive political institutions (cont.)

27 BC

Augustus became the Emperor

with Plebeian Assembly marginalized

Inclusive

Extractive

Both

Plurality

and

Centralized

State

Either

Absolutist

or

Lack of

Centralization

That is...

Extractive economic institutions in Roman Empire

The state confiscated commoners' land

State lands accounted for half of the territory

Different laws applied to different categories of Roman citizens

Agricultura workers: tied to land

By the reign of Hadrian (AD 117-138)

Since the reign of Diocletian (AD 284-305)

Beginning of the feudalism (cf. Lecture 5)

economic institutions
Secure
for everyone
Property rights Insecure
for majority of people
Free Occupational
choice
Forced labor
Free Entry of new businesses Prevented by monopolies
Unbiased System of laws Biased for
the powerful/rich
Promoted Public service provision Discouraged

Economic Institutions

Inclusive

Extractive

Property rights

Secure for everyone

Insecure for

majority of people

Occupational choice

Free

Forced labor

Entry of

new businesses

Free

Prevented by

monopolies

System of laws

Unbiased

Biased for

the powerful / rich

Public service provision

Provided

Limited

That is...

Emperors resisted creative destruction

Tiberius (14 AD - 37 AD)

killed an inventor of unbreakable glass

Vespasian (69 AD - 79 AD)

refused to use a device to transport columns with small costs

cf. Lecture 3 (Elizabeth I, Kassel state); Lecture 4 (Ottoman sultans, Francis I, Nicholas I)

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

Does the theory explain Roman Empire?

?

Archaeological evidence #1

# of shipwrecks found in the Mediterranean

Before 500 BC

Image source: ansamed.info

Around AD 1

20

180

Consequence #1: Economic decline

AD 500

20

Rose after 500 BC

 

Peaked in AD 1c

Source: Figure 3 of McConnel et al. (2018)

Consequence #1: Economic decline (cont.)

Declined afterwards

Consequence #2: Civil wars

Didius Julianus killed Emperor Pertinax

and then killed by his guard

AD 193

Emperor Septimius Severus

waged wars against his rival claimants

AD 194-197

Since AD 180, civil wars or coups took place every decade

e.g.

By 3rd century AD

Every city had a defensive wall

Settlements in Gaul moved up on hilltops for effective defence

Image source: Wikimedia Commons

Aurelian Walls of Rome, built in 275 AD

Extractive Economic Institutions

Economic Stagnation

Extractive Political Institutions

Does the theory explain Roman Empire?

Open question:

What was missing in Venice and Rome?

Inclusive

institutions

Rule of law

Economic growth

with

income equality

Free Media

Next week

Prosperity without Inclusive Institutions?

Soviet Union

 

Neolithic Revolution

 

Mayan city-states

Week 15

Term paper workshop

Week 14

Chapter 5

Finland

Italy

Myanmar

Czechoslovakia

Rwanda

Your to-do list until next class

Read Chapter 5, pp. 91-95 (summary of Chapter 5), pp. 420-426, 437-446 (sections on China)

and post questions on Prulu

1

2

Continue working on your term paper

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